Inflation and rising costs continue to pressure manufacturers and construction-related businesses, making operational discipline more important than ever. In this article for AWCI Construction Dimensions, Lisa Anderson shares why companies must strengthen their planning, scheduling, and supply chain capabilities to improve cash flow, support profitable growth, and ensure they are prepared to capitalize on new sales opportunities rather than being constrained by operational bottlenecks.
“Inflation has taken root. Businesses everywhere are dealing with annualized cost increases of nearly 7%—the fastest pace in 40 years and significantly higher than the 1.8% average of the past decade. The resulting upticks in operating costs can cause serious damage to the bottom line.
Experts don’t see relief any time soon. They point to a number of root causes, one of which is energy.
Of all the steps businesses can take to mitigate the bottom-line effects of inflation, the most important is better management of cash flow. Inflation tends to accelerate the drain of money from company coffers, and throttle the flow that comes in. If left unaddressed, these battling trends can gut profits and threaten business survival. Experts advise looking at the coming months with an eye toward estimating what will happen to cash balances.
Historic data, of course, may provide a less than reliable foundation for future forecasts. Whatever the estimates for what lies ahead, businesses can avoid cash squeezes by accelerating accounts receivable and stretching accounts payable. For the former, experts advise running regular aging reports. How much do customers owe in increments of two weeks, 30 days and 60 days? Any growth in the numbers over time might indicate a steady deterioration of cash flow.”